HEARING BEFORE THE COMMITTEE ON APPROPRIATIONS SUBCOMMITTEE ON LABOR, HEALTH AND HUMAN SERVICES, AND EDUCATION, AND RELATED AGENCIES UNITED STATES HOUSE OF REPRESENTATIVES FEBRUARY 16, 2005

Mr. Chairman and members of the Committee, I am pleased to be here today to present the fiscal year (FY) 2006 appropriation requests of the Social Security Administration (SSA). I appreciate the Committee's interest in and support of SSA in the past, and I look forward to continuing to work with you.

Overview of SSA's Programs and Overall Budget

I will begin by providing you with a brief overview of SSA's mission and overall budget. SSA advances the economic security of the Nation's people through compassionate and vigilant leadership in shaping and managing America's social security programs. These programs include Old-Age and Survivors Insurance and Disability Insurance, commonly referred to as Social Security, and Supplemental Security Income (SSI). SSA also provides service delivery support to the Medicare, Medicaid, Black Lung, Railroad Retirement, and Food Stamp programs. Our budget request is driven by our Agency Strategic Plan, which focuses on four strategic goals: service, stewardship, solvency and staff.

For FY 2006, SSA will spend $574 billion to pay monthly benefits to more than 53 million people. SSA's administrative expenses, driven by the size of the programs we administer - both in terms of the amount of work we do and the number of people we need to do it - are less than 2 percent of total outlays.

SSA has four appropriations requests before this Committee, totaling $50 billion: Limitation on Administrative Expenses, Office of the Inspector General, Supplemental Security Income, and Payments to the Social Security Trust Funds. Social Security trust fund benefit payments are permanently appropriated, and therefore, are not part of the budget requests before this Committee. However, it is important to note that the administrative resources that SSA needs in order to pay Social Security benefits are part of the appropriation requests that we are asking you to support.

Let me give you a sense of the vast number of tasks that our dedicated employees will perform in FY 2006. We will process over 8 million claims for benefits; issue 17 million new and replacement Social Security cards after obtaining and evaluating evidence of identity; process 264 million earnings items for workers' earnings records; handle approximately 58 million transactions through SSA's 800-number; issue 140 million Social Security Statements which provide individuals with a personal record of earnings on which they have paid Social Security taxes and estimates of future Social Security benefits; adjudicate appeals of Agency decisions; process millions of actions to keep beneficiary and recipient records current and accurate; and conduct continuing disability reviews (CDR) and non-disability redeterminations to avoid improper payments to Social Security and SSI beneficiaries if factors affecting their eligibility or monthly benefit amount have changed.

President's Request for SSA's Limitation on Administrative Expenses

The President's budget includes $9.403 billion for SSA's Limitation on Administrative Expenses (LAE). This is less than 2 percent of total estimated outlays of approximately $586 billion under current law, and an increase of $670 million in discretionary budget authority from our FY 2005 appropriation. This budget places a priority on service to claimants, beneficiaries, and taxpayers, for which adequate funding is critical.

The requested increase is needed to provide the salaries and benefits, facilities, computer and telecommunications equipment, and training required to deliver service to the American public. Approximately 68 percent of our administrative resources are used for personnel costs. Due to mandatory increases in these costs, such as annual Federal employee pay raises and benefit and retirement cost increases, the requested increase is absolutely necessary to maintain a stable level of effort for SSA's traditional workloads.

With the President's budget, SSA will be able to keep up with growing core workloads, over which SSA has no control, including the recent increase in disability claims. SSA will continue to reduce the time it takes to process a claim for disability benefits. The Agency will meet its new responsibilities under the Social Security Protection Act and the Medicare Modernization Act (MMA). Further, SSA will prepare for the future through service investments, such as continuing the implementation of our electronic disability project (eDib).

Almost half of the requested increase will be used to fund SSA's ongoing work related to Medicare modernization, in particular, the Medicare prescription drug program. When it passed the MMA in 2003, Congress included $500 million for SSA's initial implementation of the Act, to be used in FY 2004 and FY 2005. SSA used $54 million of that funding in FY 2004 and expects to use the remaining $446 million in FY 2005. However, our responsibilities extend into FY 2006 and beyond. The FY 2006 President's budget for SSA's LAE account includes resources to continue this activity, consistent with the enacted legislation.

SSA will meet its responsibility to be a good steward of taxpayer dollars by conducting CDRs and SSI redeterminations to improve program integrity and reduce improper payments. Further, SSA will provide actuarial analysis, strengthened research and policy development capability, and appropriate public education to support achieving sustainable solvency.

SSA plans to obtain efficiencies through automation, electronic service delivery and/or process change, amounting to a 2 percent productivity gain at the Agency level. SSA will maintain its green status on four out of five PMA initiatives, work to get to green on the remaining one, and use Program Assessment Rating Tool recommendations to achieve improved results. Additionally, we are working on the Administration's recent initiative to address improper payments.

SSA is an agency committed to technology and innovation, but it is also an agency which believes that its devoted employees are the heart of its success. SSA has made excellent progress towards meeting its goals, but still has a long way to go. This budget provides the Agency with sufficient resources to support its workforce: the men and women who are faithfully serving the American public.

Mr. Chairman, for your Subcommittee, this request represents an increase in discretionary budget authority of $670 million for SSA's LAE appropriation. I realize that this looks like a large increase to you. However, please consider that when Congress passed the MMA in 2003, $500 million was included for SSA for its MMA implementation responsibilities in FY 2004 and FY 2005. In FY 2006, however, the President is requesting resources for SSA to perform ongoing work associated with MMA as part of the LAE appropriation. If you look at the increase in budget authority for traditional SSA workloads only, the President has requested a 4 percent increase. As I've said before, this increase is vital to our ability to provide adequate service to claimants, beneficiaries, and taxpayers.

SSA's Recent Accomplishments

In FY 2004, SSA made benefit payments monthly to over 51 million people for an annual total of over $521 billion. In addition to carrying out this responsibility, SSA has made progress in meeting a wide range of challenges despite tough choices required to operate within appropriated resources.

SSA is continuing its implementation of eDib, which will significantly reduce processing times and contribute to improved decisional accuracy for initial disability claims and hearings. SSA made the commitment to implement eDib, and we are meeting that commitment - on time and on budget.

SSA is improving service delivery by offering safe and convenient online transactions such as filing claims, submitting changes of address or direct deposit information, requesting replacement Medicare cards, and verifying benefits. In addition, Social Security is providing better service for the business community by automating employer wage reporting. This increases our efficiency. In FY 2004, 60 percent of all employee wage reports (W-2s) were filed electronically, compared to 27 percent in FY 2001, just three years earlier. Another notable achievement - in just one year, we saw a 47 percent increase in the number of applications for Social Security benefits submitted online - from 148,000 in FY 2003 to 217,000 in FY 2004.

SSA increased productivity by 2.1 percent in FY 2004. Further, in FY 2001, the Appeals Council processing time was 447 days. By the end of FY 2004, it was 251 days - a reduction of almost 200 days. Additionally, in FY 2001, it took 106 days on average to process an initial disability claim, and in FY 2004, it took 95 days - an improvement of 11 days.

SSA continues to be a leader in effective management, as shown by our green status scores in four of the five President's Management Agenda (PMA) items: Improved Financial Management, Strategic Management of Human Capital, Budget and Performance Integration and Expanded Electronic Government.

I would now like to address five key areas in SSA's FY 2006 budget.

Achieving our Service Delivery Goals in the Face of Growing Workloads

SSA strives to deliver high-quality, citizen-centered service to every claimant, beneficiary, and American taxpayer. SSA's daily work affects the lives of millions of people, and the employees of SSA are very much aware of the impact their work has on those individuals and families. Commendably, the Agency's employees are producing results amidst significant growth in core workloads due to America's changing demographics.

The President's budget supports our service delivery goals by providing resources to maintain staffing, continue to improve service in the disability programs, expand SSA's online service options, perform new duties associated with the Medicare prescription drug program and the Social Security Protection Act, and handle the millions of transactions necessary to keep up with the Agency's day-to-day workloads.

One of SSA's highest priorities is to improve service to the public in the disability programs, from the initial claim through the final administrative appeal. In FY 2006, we will meet our commitment to process as many initial disability claims as we receive, keeping the number of pending cases level. SSA will address hearings backlogs by continuing to provide resources for Administrative Law Judge (ALJ) hiring, and also continuing to improve productivity, resulting in more cases processed. Additionally, we will accomplish all of this while maintaining the accuracy of our decisions.

In order to make immediate service and efficiency improvements in the hearings workload, SSA is expanding video teleconference (VTC) hearings and marketing this new technology to claimants and their representatives. With VTC hearings, the claimant does not have to travel a long distance and the hearing can be held sooner, resulting in a more timely decision. ALJs are more productive when less time is required for travel to remote sites. VTC hearings also facilitate workload transfers and significantly broaden the pool of experts available for expert testimony at hearings. In FY 2004, with capacity in approximately 160 hearings rooms, we held about 8,000 hearings using VTC. In the first 4 months of FY 2005 alone, we've already held close to 5,400 VTC hearings. By the end of FY 2006, SSA plans to have equipped every hearing room with VTC, for a total of over 360 systems in place.

Investing in Technology and Implementing an Electronic Disability Claims Process

SSA places a high priority on information technology investments. Our FY 2006 budget authority for information technology is increasing from $370 million to $494 million, an increase of $124 million. SSA plans to invest in infrastructure and office automation necessary for the support of ongoing operations, including maintenance of SSA's National Computer Center, telephone services, and hardware and software nationwide.

The most notable strategic investment is eDib, a major Agency initiative that will move all components involved in disability claims adjudication and review to an electronic business process through the use of an electronic disability folder. EDib is expected to reduce processing times significantly over the long term. Implementation began in January 2004, and the project is truly revolutionizing the way we do work. EDib is essential for making changes for the long-term. To date, SSA has begun implementation of the electronic disability folder in 30 States, Puerto Rico, and the Federal Disability Determination Service, and expects to complete implementation in all States in FY 2006.

Claimants can now visit SSA online at www.socialsecurity.gov to submit disability information, which is used in the adjudication of their cases. Further, the Agency has begun using an electronic version of the authorization to release medical records, and is moving towards an electronic system to receive medical evidence. Once we have rolled out eDib to all States, SSA will have the largest repository of medical records in the world, and we will see real progress in eliminating avoidable delays in the disability claims process.

Signature proxy is another major Agency initiative underway that will improve benefit application services to claimants who file online, by phone, or in person. This process removes the requirement for a "wet" signature on benefit applications and continues the Agency's progress to a totally electronic environment. For online applicants, clicking a "sign now" button at the end of the application constitutes a valid signature. For people applying for benefits by phone or in person, claims representatives ask them to verify that they are filing for benefits and understand the penalty for giving false information. The applicant's response is added to the electronic claims record. In all cases, certain proofs, such as birth and marriage certificates, evidence of earnings, and medical evidence for disability claims, are still required to determine if a claimant is eligible for benefits. Signature proxy continues Social Security's progress toward a totally electronic claims process.

In addition to applications for benefits, other online services allow current beneficiaries to check their benefits, enter changes to their address or direct deposit information, and obtain replacement 1099s and proof of income letters. In FY 2004, usage of our Internet transactional services increased by over 80 percent from FY 2003. In FY 2006, we will further expand the usage of these services by focusing on improving their usability, encouraging the public to use SSA's Internet website, and partnering with other Federal, State and local entities to promote consolidated service delivery. SSA has invested substantially in electronic service delivery and will continue to do so as a critical means of providing service to millions of baby boomers.

Ensuring the Integrity of SSA's Programs

SSA's mission demands that we balance our commitment to service with our obligation to be good stewards of the programs we administer. We fulfill this obligation through cost-effective program integrity work such as CDRs, periodic non-disability redeterminations, overpayment collections, and strengthened management of our programs. Overall, these activities will reduce the Federal deficit in 2006 and beyond.

This budget supports SSA's efforts to improve payment accuracy through a broad range of activities designed to prevent and detect improper payments. These efforts include significant budget investments in CDRs and SSI non-disability redeterminations, as well as increased emphasis on the use of computer matches to identify and prevent overpayments. In FY 2006, SSA will process 2.1 million redeterminations.

The President's budget proposes $601 million in dedicated administrative funding for cost-effective CDRs in FY 2006. Further, the President's budget proposes that discretionary spending caps be reinstated in any budget reform legislation that Congress considers. If caps are reinstated, the President proposes to adjust the caps for program integrity work, including $189 million of SSA's CDR funding. I know the Committee is familiar with the cap adjustment for CDRs under the previous discretionary spending caps. In FY 2005, SSA will process 1.4 million CDRs, and in FY 2006, SSA will process 1.6 million. These reviews result in $10 in program savings for every $1 in administrative cost.

SSA has significant new responsibilities as a result of the Social Security Protection Act (SSPA), designed to combat fraud and improve program management. Many of the new responsibilities relate to the representative payees that SSA appoints for individuals who are incapable of managing or directing the management of their benefits. The SSPA strengthens SSA's oversight and control of these individuals and organizations. Its provisions place stricter requirements on representative payees and hold dishonest payees who misuse benefits liable for their actions.

In addition, the SSPA requires SSA to issue a receipt to disabled beneficiaries each time they report their work and earnings. It extends to Title II the current Title XVI prohibition on paying benefits to persons fleeing prosecution, custody, or confinement after conviction and to persons violating probation or parole. It closes the Government Pension Offset loophole and requires SSA to send a modified Social Security Statement to non-covered employees that describes the potential benefit reductions that may result from the receipt of a Federal, State, or local Government pension based on non-covered employment. The Act also authorizes cross-program recovery of overpayments paid under one program from the benefits paid under another program.

This budget also supports SSA's long-term effort to combat SSN misuse and identity theft. The Agency has taken many steps to strengthen its capability to prevent those with criminal intent from obtaining Social Security cards for fraudulent purposes. SSA verifies immigration documents for all non-citizens with the Department of Homeland Security and verifies refugees' documents with the Department of State. SSA is also implementing provisions of the Intelligence Reform and Terrorism Prevention Act of 2004 (Public Law 108-458) which place limitations on the number of replacement Social Security cards an individual may request. Additionally, based on the positive evaluation of the Brooklyn Social Security Card Center, SSA plans to establish a card center in Las Vegas in FY 2005, and is evaluating further expansion in other metropolitan areas, dependant on overall service delivery needs and available resources.

Administering the Medicare Prescription Drug Program

SSA's service delivery efforts will also focus extensively on its ongoing responsibilities under the MMA, related to the prescription drug program premiums and subsidies. SSA will identify low-income beneficiaries who might be eligible for drug benefit subsidies, make low-income subsidy determinations, withhold premiums appropriate to beneficiaries' selected plans, and calculate Part B premiums for high-income beneficiaries.

In 2003, Congress provided funding for SSA's initial MMA implementation in FY 2004 and FY 2005. However, our responsibilities extend into FY 2006 and beyond. The majority of SSA's costs for these significant new Medicare workloads will be associated with the employees needed to handle them. SSA has already begun to hire additional front-line staff needed to process the new workloads in FY 2005, and this budget provides the resources needed to support this new staff in FY 2006.

Increasing SSA's Overall Productivity

In FY 2004, once again we exceeded our Agency-wide productivity goal. We achieved a 2.1 percent increase in productivity, due largely to the dedication of our employees. Considering that we had a 5.1 percent increase in productivity in FY 2002 and a 2.1 percent increase in FY 2003, our continued success in achieving productivity improvements is even more noteworthy. Our goal for FY 2006 is to again obtain efficiencies through automation, electronic service delivery and/or process change, amounting to a 2 percent productivity gain at the Agency level.

SSA has a number of technology-related initiatives underway to improve productivity, including: eDib, enhanced Internet applications, signature proxy, improvements to the earnings process, 800-number enhancements, and further automation of our SSI systems. Further, we have several management and policy initiatives underway to improve productivity, including instituting centralized screening units in the Office of Hearings and Appeals and implementing our new cross-program recovery authority.

Other FY 2006 Appropriation Requests

I would like to turn now to a brief summary of the other appropriation requests for FY 2006.

Office of the Inspector General

$93 million for the Office of the Inspector General (OIG) - Since becoming an independent agency in March 1995, we have had our own Inspector General whose mission is to protect the integrity of SSA's programs. A strong OIG, working together with SSA employees in local offices, is the most effective means we have to detect and prevent fraud and abuse in the programs we administer. A strong OIG also is essential given the need to continue working with law enforcement in conjunction with homeland security efforts.

The request for FY 2006 represents a $3 million increase in resources from the FY 2005 appropriation. This increase covers mandatory payroll related costs such as Federal pay raises and benefit rate increases. The increase allows OIG to maintain its current staffing level to adequately continue its stewardship activities and Homeland Security responsibilities, including participation in anti-terrorism task forces. With the resources included in this request, OIG will continue major initiatives focusing on key areas such as SSN misuse, disability fraud (through the Cooperative Disability Investigations program), and expanded ability to impose civil monetary penalties against violators as result of enactment of the SSPA.

Supplemental Security Income

$41 billion for the Supplemental Security Income (SSI) Program - The SSI program ensures a minimum monthly level of income to eligible aged, blind, and disabled individuals. An individual's income, resources, and living arrangements are evaluated to determine the monthly SSI payment. This request includes $38 billion for Federal benefit payments to approximately 7 million aged, blind, and disabled beneficiaries and $3 billion to reimburse the Social Security trust funds for SSI administrative expenses, $52 million to provide for vocational rehabilitation services, and $27 million to fund extramural research and demonstration projects.

This represents a decrease of $594 million or 1.4 percent from FY 2005. Estimates of current benefits are driven by the number of recipients eligible for monthly payments and the amount of the monthly payments. Even though the number of recipients will increase by 199,000, the benefit payments will decrease because fewer monthly payments will be made in FY 2006 compared to FY 2005. SSI monthly payments are normally paid on the first of the month. However, when the first of the month is on a weekend or holiday, the payment is made on the preceding business day. Monthly payments will total 13 in FY 2005 and 12 in FY 2006.

Payments to the Social Security Trust Funds

$20.5 million for Payments to the Social Security Trust Funds - This request will serve to reimburse the Social Security trust funds for the costs of certain benefits and administrative expenses. This represents an increase of $16,000.

Conclusion

The President's FY 2006 administrative budget for SSA, including $9.403 billion for LAE and $93 million for the Inspector General will provide the resources to help us: maintain service in the face of growing workloads; fully implement an electronic disability claims process; continue to increase overall productivity; ensure the ongoing stewardship of our programs; and, help administer the Medicare prescription drug plan.

I am proud of our record of accomplishment in management of the Social Security Administration. We've earned the highest status score - green - on the President's Management Agenda in four of the five initiatives: improved financial management; strategic management of human capital; expanded electronic government; and, budget and performance integration. In a letter to Federal employees at the end of January, OMB Deputy Director for Management Clay Johnson highlighted SSA as one of the most successful Agencies at instilling the management disciplines and habits that are part of the PMA. SSA is one of only four Federal agencies to have four green status scores and no red status scores; no agency has yet scored green on all five initiatives.

We have received unqualified opinions on our financial statements since 1994 and the Association of Government Accountants Certificate of Excellence in Accountability Reporting for the past six years. We received the Microsoft Government Solutions Award in the Government to Citizen category at the first-ever Microsoft Solution Recognition Awards Ceremony. We were recognized for "effective use of Information Technology in helping government perform its mission more effectively or provide superior service to citizens." The award specifically cited the Internet Social Security Benefit Applications. A congressional report card rates Social Security's computer security efforts among the best in the Federal Government. SSA has been among the top-ranking government agencies in each of the four years the report has been issued, twice earning the top grade of all Federal agencies.

SSA's service and accomplishments are recognized by the President, other Federal agencies, numerous associations and companies, as well as the public we serve. In the annual University of Michigan Public Satisfaction Survey, which measures household consumption experience provided by 70 Federal agencies, SSA was in the top ten percent for 2004, receiving a satisfaction score of 81 percent from retirement benefit recipients. The Federal Government's overall satisfaction score last year was 72.1 percent.

Today, I've explained the progress we've made, our plans for the future, and the recognition SSA has received. Clearly, I am very proud of our successes, and I believe they prove that we manage our resources well. However, I would be remiss if I did not give credit to the more than 65,000 SSA employees and 14,500 State DDS employees who truly are the best in Government. Their dedication to serving the public effectively and efficiently, and doing so with compassion, is unmatched. Nevertheless, I know, and our employees know, that we cannot rest on our accomplishments. We must continually strive for improvement. The FY 2006 President's budget for SSA will allow us to maintain stable staffing to meet the performance goals outlined in the budget justification provided to you, and to help implement the Medicare prescription drug program.

Thank you for the opportunity to present SSA's budget request to the Committee. In addition to serving as a steward of the public's funds, Social Security, unlike most Federal agencies, provides direct service to the American public. In FY 2004, we made payments to over 51 million people each month, and we served approximately 28 million visitors to our more than 1,300 field offices in communities across America.

Although I recognize that there are many competing priorities, I believe the Social Security Administration deserves your full support. I look forward to working with you and appreciate your continued support of our programs and people.